A ban on liquor sales at establishments within 500m of state and national highways, effective April 1, has struck a serious blow to India's hotel industry.

Hotel sources said about 50 per cent of hotels in the country come under the ambit of the ban. This includes the Oberoi Gurgaon, Westin Mumbai, Le Meridien Kochi and Radisson Guwahati, to name a few.

With ban, over 100,000 establishments expected to close, hotel and restaurant federation says

The Federation of Hotel & Restaurant Association of India estimates it would result in the closure of more than 100,000 establishments and a loss to both states and the industry to the tune of 20,000 crore rupees (US$3.2 billion).

The association has decided to take legal actions against the order.

The impact on banquet business is expected to be massive. Sudesh Poddar, director, Nataraj Group of Hotels, told TTG Asia half of a hotel's revenue comes through F&B sales. “We expect that 60-70 per cent of the banqueting business of hotels close to the highways will be gone,” he said.

S M Shervani, managing director of The Shervani Group, expects many hotels will be forced to close down. “At a time when we are competing with global markets, the move doesn’t augur well for the industry,” he continued.

Moreover, Shervani said: “The liquor ban has hit badly entrepreneurs who have taken loans to invest in building hotels.”

Many owners of new projects in West Bengal are now considering using the land for a mall or a housing complex instead, said Vinaay Malhotra, senior vice president, Hotel and Restaurant Association of Eastern India.

“The owners of new Marriott property that was coming up in Guwahati have now slowed construction down,” he told TTG Asia.